NEW YORK, Feb. 13 /PRNewswire/ -- Standard & Poor's today assigned its
mx-single-'A'-minus national scale rating to the City of Colima, Colima,
Mexico. The outlook is stable.
The rating on Colima reflects the following credit weaknesses:
-- The city's limited control of its property tax assessment, which is
still managed by the state;
-- Weak budgetary performance;
-- Decreasing capital expenditures; and
-- The lack of third-party audited financials.
Factors offsetting these credit weaknesses include:
-- Manageable capital needs;
-- Low debt levels;
-- Good coverage of basic infrastructure; and
-- Sophisticated accounting systems.
Colima has limited control of its property tax assessment, which is still
managed by the state. State legislation limits the city's ability to increase
the value of its property and capital gains tax rolls, which further
constrains Colima's revenue flexibility. Own-source revenues decreased to
MxP53.8 million in 2001 from MxP54.6 million in 2000, and are currently
equivalent to 28.3% of total revenues. Currently, the city is running a
property regularization process that is expected to generate additional
revenues.
Colima's budgetary performance has been weak. Since 1999, the city has had
overall deficits. In 2001, the city's overall deficit reached MxP9.2 million,
or 4.9% of total revenues. On an operating basis; however, Colima has had
positive balances since at least 1998, averaging 21% of total expenditures.
For 2002, the city has budgeted an MxP6.5 million cash reserve to strengthen
its fiscal position. Nevertheless, the effect that this reserve will have on
the overall performance of the budget will be largely determined by the city's
ability to manage its operating expenditures, including payroll, an item that
has typically increased substantially above budget. The city's increasing
pressure on its operating budget has resulted in a decrease of its capital
spending, to 14.9% of budget in 2001 from 24.1% in 2000.
Colima (population 129,958) is the capital of the state of Colima, which
is located in the western region of Mexico. The city's economy is focused on
commerce, services, and agriculture. The employment base is mainly focused on
services (42.7%), commerce (23.5%), and government (9.2%) sectors. Because of
the economic slowdown, Colima's unemployment rate increased to 3.2% (December
2001) from 2.6% (December 2000).
The city's overall debt burden is low and compares favorably with other
rated entities in Mexico and worldwide. The city's current outstanding debt of
MxP6.1 million is equivalent to a low 3.2% of operating revenues. For 2002,
the city is planning to issue an additional MxP20 million in new debt to
finance several infrastructure projects. Even after considering the issuance
of additional debt, Colima's debt ratios remain low at 13.8% of 2002 budgeted
operating revenues.
Colima does not have any contingent liabilities. The city's water utility
and public safety entity are run by the state. In addition, the city
participates in the federal pension system (the Mexican Social Security
Institute, IMSS), and is current on its contributions to the system.
OUTLOOK: STABLE
The stable outlook reflects the expectation that the city will maintain
manageable debt ratios.
SOURCE Standard & Poor's
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Related links:
http://www.standardandpoors.com/ratings
CONTACT:
Paulina Campos, +52-55-5279-2043, Horacio
Aldrete-Sanchez, +52-55-5279-2042, Antonio Huerta,
+52-55-5279-2041, or Jane Eddy, +1-212-438-7996, all of Standard
& Poor's
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